Now Makes for a Good Time to Save on Real Estate

by Guest Contributor · 3 comments

If you don’t own a house, this may be the perfect time to consider one, as the real estate market has just about bottomed out in certain markets. Between foreclosures, people upside down on their mortgages, and a glut of homes on the market, you have your pick of properties too. Add to that the historically low interest rates, and you can see why buying now may save you a lot of money.

Know Your Market

The first step to getting a good deal is to know your market. Certain areas are not as heavily affected by the downturn in the economic climate. For example, I live in a highly military town. With officers moving in and out constantly on a 2-3 year rotation, good properties don’t sit long. There has been very little change in home prices thus far. Fifty miles away, the story is quite different though, so make sure you do your homework.

Pick the Right Mortgage

Buying a home involves all sorts of legalities and paperwork. The basics remain the same nevertheless. A fixed mortgage is your best option if you can get one. That way your payments won’t increase over the life of the loan. After a few years you can toss in a few extra dollars of principal each month, and pay off the loan faster.

Closing costs are always negotiable in some form or another. Mailing fees, title search fees, points, and commissions are all open to debate. In a market where sellers are desperate and banks are sitting on homes for months, you will find it quite easy to convince a lender to forgo some fees just to unload a property.

Due Diligence Counts Even More

Because people are eager to get out of their homes, you need to be particularly careful when negotiating a purchase. Spend the extra money to have an independent home inspector. Make sure to schedule a walk-through before closing and then follow through. This is especially important if you are purchasing a property that is being auctioned.

Look for Deals on Auction

When a bank forecloses on a house it wants to get rid of it as soon as possible, they usually offer the homes for the price of the remaining mortgage. The longer they have it on the books, the more it costs them. Foreclosure auctions are an unfortunate reality today, but you stand to save a lot of money if you can get your home this way.

With auctions, you also need to bring cashiers check and be willing to pay on the spot, so you will need to have your financing in place before you make bids.

Buy Only What You Need

One of the most expensive mistakes you can make when purchasing real estate is to buy more than what you need. It can be very tempting to get a larger house when you can get a great price on it, but consider the future implications.

Larger homes have more maintenance, higher property taxes, increased heating and cooling costs, and more cleaning to do. The mortgage, even a reduced one that results from buying a home that is in foreclosure, will be larger than that of a smaller home, and it can add up over 30 years.

Getting a house is expensive, so take the time to make sure you are comfortable with ownership before you decide.

This is another piece from the How to Save Money on Everything ebook. Check out your free copy by signing up for the free frugal newsletter.

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  • marci says:

    Right now in Moo-town there are skads of foreclosed homes for under $100,000, some for under $60,000…. Good solid homes that sold for double and sometimes triple what they are going for now.

    I just bought one, in the country, for under 60% of it’s last sale price from 4 years ago (before the downhill slide) and for 78% of the 10 year ago price… What a bargain. I had been looking to move out of town and into the countryside (even if only 10 minutes away) and for me this was the perfect time, opportunity, and house with 2/3rds acreage and a double garage. The house is under 1000 sq ft, just like the one I own now and will be renting out – but more garden space, some orchard space, elbow room, and unobstructed views (unless you count wire fences) from the sunrise over the coast range to sunsets over the capes range…. Gorgeous. What fun.

    Remember when buying a foreclosure and paying cash – 10 days from offer to closing – that you are probably buying where-is, as-is…. and be financially prepared for some surprises. There will be deferred maintenance and the home will have sat empty for awhile, most likely. I regularly figure 10% of the sale price, or a minimum of $10,000 cash to have on hand, in case there are surprises….. like the septic tank replacement and a leaking garage roof and a lot of paint in my case 🙂

    If you are prepared, had been thinking about it, and can financially do it, it’s a wonderful time to buy. My present house is rented as soon as I move out – it is definitely NOT the time to sell it . 🙂 Good luck.

  • John says:

    While now may turn out to be good time to buy a home, better that decision is made on what suits your needs and budget rather than attempting to time the market.

    Agree with the rest of the article.

  • Sam says:

    Excellent article. Provides great advice on what mistakes to avoid in purchasing a house, especially in this hard economic times.

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